NNN Leases - Does OpEx (Technically) include RE Taxes?

What's the consensus on the term "OpEx"? I've seen it used inconsistently for commercial leases. Some brokers refer to OpEx as including all nets in a NNN lease. Others only use it to refer to the expenses excluding RE Taxes.

For example, I've seen many commercial leases from brokers that state:

My understanding is that "operating expenses" is the umbrella term that includes real estate taxes, CAM, insurance, and everything else. So the above example differs from my definition in that it's only referring to the operating expenses excluding RE Taxes and not inclusive of everything. 

My understanding below:

  • Real Estate Taxes: $5.00/SF
  • CAM/Insurance: $10.00/SF
  • Total Operating Expenses: $15,00/SF

Am I misunderstanding the definition of OpEx here? 


 
Most Helpful

On most operating statements, OpEx is broken out into RE Taxes, Prop Insurance, and CAM's. Some might make the distinction between Operating Expenses and RE Taxes because Taxes aren't needed to "operate" a building, at least not in the same way as PM fees or landscaping expensea are. But industry standard is to lump RE Taxes into OpEx.

 

OpEx includes RE Taxes. A true NNN lease would therefore pay the OpEx, including the RE Taxes.

Sometimes, modified NNN leases will carve out certain expenses from tenant’s responsibility. This could be property management fees or maybe certain professional fees like legal/accounting. Theoretically, a lease can customize anything into it as far as what expenses and amounts are whose responsibility. So in short, read the lease and model the reimbursements accordingly to exactly how the lease outlines it.

 

With a true triple-net lease, the tenant will be responsible for all expenses including taxes, insurance, repairs & maintenance, utilities, and sometimes property management. I've seen "operating expenses" broken out separately for the purposes of reimbursement expense pools, with taxes being a separate reimbursement, but that's usually for modified-gross leases where tenants are reimbursing over base year expenses (usually multi-tenant office properties). So they'll reimburse the real estate taxes over a base year amount, and then the rest of the operating expenses will be pooled together and reimbursed separately. Taxes are usually referred to in the lease as "impositions"

 

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